I have just sent the 2011 edition of Federal Taxes and the Private Clubs to the printer. It will be ready at CMAA’s Annual Convention and you can pick it up at one of my session. However in putting it together, there were some interesting statistics from the IRS and its emphasis on examining tax exempt organizations. Since the base year in 2004, the IRS has almost doubled the number of audits of tax exempt organizations with a twelve percent increase in the last year alone. On top of this. the number of employees within the EO Division has increased by thirteen percent over the last three years
In addition to an increased number of examinations, the IRS also expanded its collaboration with outside agencies allowing it to focus its exam resources on noncompliant organizations. The above graph, from the EO Newsletter, shows the total number of returns examined. A compliance check is not a full examination but rather is an inquiry about an item on a return. It allows the service to contact more people and leaves greater resources for full examinations.
Over the last year, the IRS has begun to develop demographic information based on the 2008 redesign of Form 990. The IRS sees the Form 990 as its primary tool to increase transparency and to promote and enforce compliance with the tax law. In its year end report, the IRS stated ” … EO Examinations will use the updated form to identify non-compliant and potentially non-compliant organizations for examination, to develop targeted compliance projects and to inform and supplement educational efforts.” With the emphasis the IRS is placing on the Form 990, it is critical that taxpayers complete the form fully. Leaving areas blank or failing to disclose required information is an invitation to an audit. In addition, penalties could be assessed for a failure to file a complete return. Have you seen many IRS audits in your area and what was the focus?